Insurance is a big opportunity in a country like India with a large population and untapped potential. The life insurance business (measured in the context of first year premium) registered a growth of 23.88 per cent in 2007-08, (94.96 per cent achieved in 2006-07). The general insurance business (gross direct premium) has registered a growth of 11.72 per cent in 2007-08 (3.52 per cent achieved in 2006-07). This has resulted in increasing insurance penetration in the country. Insurance penetration or premium volume as a ratio of GDP, for the year 2007 stood at 4.00 per cent for life insurance and 0.60 per cent for non-life insurance. The level of penetration, particularly in life insurance, tends to rise as income levels increase. India, with its huge middle class households, has exhibited growth potential for the insurance industry. Saturation of markets in many developed economies has made the Indian market even more attractive for global insurance majors. The insurance market in India has witnessed dynamic changes including entry of a number of global insurers in both life and non-life segment.

Most of the private insurance companies are joint ventures with recognized foreign players across the globe. Over the last eight years, consumer awareness has improved. Competition has brought more product innovation and better customer servicing. This made a positive impact on the economy in income generation and creating employment opportunities in this sector.

I) Life Insurance

The total capital of the life insurers at end March 2008 stood at Rs.12296.42 crore. The additional capital brought in by the existing private insurers during 2007-08 was Rs.3787.01 crore and the two new entrants, brought in equity of Rs.385 crore making the total additional capital brought in 2007-08 by the private insurers to Rs. 4172.01 crore. Of this, the domestic and the foreign joint venture partners added Rs.3160.12 crore and Rs.1011.88 crore respectively.

LIC

5.00

0.00

5.00

Private Sector

8119.41

4172.01

12291.42

TOTAL

8124.41

4172.01

12296.42

There has been no infusion of capital in the case of LIC which stood at Rs.5 crore.

Innovations in products

TABLE 5 PAID UP CAPITAL : LIFE INSURERS

(Rs. Crore)

INSURER

March 31,

Additions

2007

during 2007

-

08

March 31, 2008

Growth in insurance industry has been spurred by product innovation, vibrant distribution channels coupled with targeted publicity and promotional campaigns by the insurers. Innovations have come not only in the form of benefits attached to the products, but also in the delivery mechanism through various marketing tie-ups both within the realm of financial services and outside. All these efforts have brought life insurance closer to the customer as well as made it more relevant. The insurance companies are increasingly tapping the semi-urban and rural areas to take across the message of protection of life through insurance cover. The insurers have also introduced special products aimed at the rural markets.

The design of ULIP products addresses and overcomes several concerns that customers have had in the past like liquidity, flexibility and transparency. ULIPs are structured products and give choices to the policyholder. The Authority prescribed guidelines for Unit Linked products, stipulating minimum risk to be covered, minimum period of premium payment and several other requirements including NAV computation. With ULIP guidelines in place, there has been an enhanced transparency on the charges involved and associated risks. Fund-wise Net Asset Values (NAVs) and portfolio allocations are disclosed on a regular basis.

One of the most significant outcomes of the enhanced competition has been the reduction in the rates for pure protection plans. Over the last seven years, the rates have been revised downwards, and are significantly lower than those